BOOM spotlights Permian’s contributions

Posted on January 2, 2020

A panel discussion titled “BOOM: A Conversation about How the Oil and Gas Sector Impacts Texas” talked about the benefits and struggles resulting from the region on the cusp of becoming the most productive energy producing region in the world.

Panelists included State Rep. Brooks Landgraf, R-Odessa, Tracee Bentley, president and CEO of the Permian Strategic Partnership and Ben Shepperd, president of the Permian Basin Petroleum Association. Marilu Hastings, vice president for sustainability at the Cynthia and George Mitchell Foundation, was listed as a participant in advance material but was not in attendance.

Moderated by Ross Ramsey, executive editor and co-founder of The Texas Tribune, it was held in the Zant Room of the Saulsbury Campus Center at Odessa College and attended by industry representatives, concerned citizens, a top Odessa Chamber of Commerce official and others.

“I think it’s important for the rest of the state to understand the contributions the Permian Basin makes, not only to our tax base but to our economy and I think that’s why it’s so important to have this conversation out here,” Landgraf said before the discussion began.

“We are generating all this tax revenue for other parts of the state, but we have the highest fatality rate on our highways here in the Permian Basin and so there’s a disconnect there and I think having this conversation with a statewide audience allows us to link those two things together and show that yes the Permian Basin does so much, but we also have some needs out here. Our safety is at risk,” Landgraf said. “We have dangerous highways. We have teacher shortages and it’s important for the rest of the state to understand that, and hopefully, that will allow us to better address that as we move forward.”

He added that the economy is diversifying in the Permian Basin and it is much better now than it was in the 1980s when oil and gas were really the only show in town.

“We are developing a robust health care industry here. We are also diversifying in other ways. Do we still have room for improvement? Absolutely, but we do have to continue to diversify economically. I think as we make investments in public education, in law enforcement, in healthcare that’s going to help increase salaries for everybody (so) whether you work in oil and gas or not you can afford to live here. But that’s got to be part of the equation,” Landgraf said.

Asked about layoffs in the industry, Landgraf said the fourth quarter is always the worst, especially when you’ve had a very productive year.

“So much money was spent early on that companies are at the end of their budgets. I think the long-term health of the industry is going to be strong as it’s always been, but there’s no question we’re going through a little bit of a slowdown. … We’re still growing, it’s just at a slower rate,” he said.

When things slow down is when Landgraf said it’s time to make investments in infrastructure so the area can be prepared for the next uptick in production.

Landgraf and Shepperd said they don’t like to use the terms boom and bust, even though it was part of the name of the program. Both noted that oil and gas is more consistent these days than it used to be.

“… This is almost like a mining operation now where we’ve been talking about the record-breaking production, but this has all been really at prices that have been below $75 a barrel. Used to, it took prices $100 a barrel for us to have a boom so I think it has leveled out quite a bit. If we are going to continue to have energy production in this country, it’s going to happen in the Permian Basin so it’s really not the boom and bust cycle that we’ve been accustomed to in the past,” Landgraf said.

Bentley said the area has to grow in a smart fashion so it can take on all the opportunities that are available. PSP is an alliance of 19 energy companies in West Texas and Southeast New Mexico. The companies have come together to support the community tackling issues such as safer roads, improving schools, upgrading health care, increasing affordable housing and training the next generation of workers, its website said.

“It’s a good problem to have, but we have to be very careful that we don’t let it get away from us. So I can tell you from our perspective my companies are committed to being here for the long haul. Many of them have publicly put out 40-year … investment plans to be in the Permian Basin. I’ve never seen anything like that before around the country, or from companies,” Bentley said. “But that shows you their level of commitment that even when prices dip a little bit, they’re in it. They’re in it to stay. So messaging that to folks that we want to come partner with us and invest with us has proven to be very, very critical. When we’re talking about building affordable homes, for example, we are trying very hard to message to developers build and we’re going to be here. In fact, we’re going to grow, so partner with us and let’s expand in a very smart way.”

Asked about the biggest needs in the area, Bentley said every place is different but when it comes to recruiting and retaining top talent education is the No. 1 thing companies ask about.

She said there is work to do on education in the Permian Basin, which people with the school districts will tell people, but the good news is that people are willing to partner. She noted the example of IDEA Public Schools, which has been funded by Permian Basin companies, foundations and individuals from Odessa and Midland.

IDEA plans to open its first campus in Midland in 2020 and the next in Odessa in 2021.

Shifting back to oil and gas, Shepperd said about 10 years ago “we were producing less than a million barrels a day.”

“Today, we’re producing about four and a half. If you include New Mexico, it’s five and a half. Projections are that we will continue to grow, although some estimates have us going to 8 million a day by 2023,” Shepperd said.

He noted that there have been layoffs this year.

“There’s been a whole lot of pain in the independent sector with the private equity squeeze. A lot of companies have lost their value, so we’ve seen some layoffs this year, but because of the forward-thinking that’s going on in Odessa and Midland and additional groups and horsepower put toward this effort, you are seeing companies doing 10-year, 20-year, 30, 40-year plans so that this kind of bump in the road at $50 and $48 oil — fortunately it’s up now a little bit. I think you can’t overemphasize the importance of the planning that’s going on …,” Shepperd said.

Asked about climate change, Shepperd said people in the industry live, work and send their children to school in the middle of the oilfield.

“We understand firsthand what the conditions are like. We want to continue to do this for years to come. The industry has come to realize that we have to do a better job of taking care of the environment, taking care of our people (in terms of safety). Almost all large independents and majors have added resources to their staff to form better sustainability efforts to reduce methane emissions, reduce flaring,” Shepperd said.

He added that he thinks the industry and environment can co-exist.

Landgraf said there has been an overall decrease in carbon emissions because of increased natural gas use, as opposed to coal. By extension because of technological advances are able to transport liquefied natural gas, for example, overseas.

“If you want to reduce flaring, the best way to do that is more pipeline capacity. Then you reduce pressure on existing lines,” Landgraf said.